The Financial Foolishness of Christie’s ARC Gambit

Without ARC, these century-old tunnels will remain the only way for NJ Transit commuters to get to Manhattan. Photo: NJ Transit via ##http://secondavenuesagas.com/2010/09/16/for-christie-a-wavering-arc-commitment/##Second Avenue Sagas##

Two weekends ago, construction on New Jersey’s most important transit project was called to a temporary stop by Governor Chris Christie. He declared a thirty-day review period for the ARC tunnel project, which would build a new rail tunnel below the Hudson and double commuter rail capacity from New Jersey. Many worry the review is just a prelude to axing the $8.7 billion project altogether and using the money saved to patch up New Jersey’s Transportation Trust Fund for a couple of years.

Currently, only a single pair of century-old tunnels carry New Jersey Transit trains into Penn Station, and with NJ Transit ridership more than quadrupling since the 1980s, those tunnels are at capacity. “Every two minutes, a train enters Midtown Manhattan from New Jersey,” said Juliette Michaelson of the Regional Plan Association. “That capacity cannot increase.”

Without a new tunnel, commuter rail in New Jersey simply cannot expand. If ARC is built, however, it would be expected to carry 100,000 more commuters into Midtown, more than doubling capacity. Estimates suggest 22,000 cars would be taken off the road as a result. “It’s a game-changer,” said Michaelson.

Christie’s decision to halt all work on the project for thirty days has put the project in grave peril.

Ostensibly, the reason for the construction delay is to investigate cost overruns. However, at a hearing of the State Assembly’s Transportation Committee this Monday, NJ Transit Executive Director Jim Weinstein admitted that the administration had discussed using the funds committed to ARC to patch up the state’s Transportation Trust Fund, which funds both transit and roads and is on pace to go bankrupt next year. That’s a sign that the delay isn’t for an audit, but, in the words of the New Jersey Star Ledger, “a trial balloon to test the reaction to killing the project.”

If Christie decides to sacrifice ARC to keep the TTF afloat, it might solve one political headache for him, but not for long. “Back of the envelope, we’re talking two years, three years tops,” estimated Zoe Baldwin, the New Jersey advocate for the Tri-State Transportation Campaign. “It’s political pain-avoidance.”

Michaelson agreed that ARC funds would only finance TTF for two or three years. “Can he keep his hands off the cookie jar of money that previous governors have set aside for ARC?” she asked.

Baldwin suggested that instead, Christie look at raising the state’s gas tax, which is the third-lowest in the country and hasn’t budged for 21 years. “We’ve raised all kinds of other fees and taxes, she said, but the gas tax and other transportation fees have been untouchable.” That’s led to a years-long crisis in transportation funding for the state.

If Christie decides to kill ARC, that could be it for the project for decades. Currently, the cost of the project is split three ways. The federal government is contributing $3 billion, its largest contribution ever to a transit project. The Port Authority is paying another $3 billion. New Jersey would commit the rest, currently estimated at $2.7 billion. “The chances of the stars aligning again the get all three entities to pony up, it’s unlikely,” said Baldwin. That same agreement, she added, means that Christie’s decision is likely to be all-or-nothing for ARC. A renegotiation of the terms would be difficult.

The fiscal irresponsibility of killing ARC for a one-time infusion of cash becomes clear once you dive deeper into the numbers. To begin with, the operating revenue ARC would bring in is projected to outweigh its operating costs. It would turn a profit, once it’s built.

Moreover, the economic impact of providing more access to New York City far outweighs the project’s price tag. An RPA study from July looked at recent rail expansions in New Jersey and found that ARC would raise New Jersey property values by a total of $18 billion. A projected $50 billion in wages would come back to the state from high-paying Manhattan, said Baldwin.

This influx of wealth would, of course, be taxed. A report by NJ Transit [PDF] estimated that in 2025, ARC would add almost $100 million in taxes a year to New Jersey’s balance sheet. On top of that, RPA estimated that ARC would generate $345 million a year in local property taxes.

The amount of economic activity generated for the state would be even higher. “The economic future of the state rests on being able to keep on getting more and more people who live in New Jersey working in Manhattan,” said Michaelson.

So what’s next for ARC? Ultimately, the decision is up to Christie, but there are a few things to watch for before he makes his move. Baldwin pointed to a move by the Democrat-controlled legislature to condition certain TTF approvals on a long-term plan for the fund from Christie. Baldwin said that the governor’s reaction to the legislature could give a better sense of where his mind is.

Michaelson said that a strong statement by New Jersey’s business community could change the political dynamic. “I’m looking for the business community to come out and say we need this tunnel,” she said. “I feel like their voice has been lost in the mix.”

It’s great when a politician stands up and says ‘hey, we can’t blow taxpayer money on a bonehead project.’ But on this one, the only bonehead is Christie himself if he can’t see how much money ARC will bring to Jersey and how much higher quality of life will be.

Larry Littlefield

In the near future New Jersey won’t have money for anything but debts and pensions. They didn’t raise the gas tax, but they spent the money anyway and borrowed so no one would complain about the downside. Now all the “dedicated” transportation money is going to debt service. All of it.

Just think of it. The future residents of New Jersey paying those taxes, tolls and fares — in exchange for nothing. No trains. No road maintenance. No nothing.

They’ve run their pension system the same way. I this case, it’s like Albany on steroids.

Fake Marcia Kramer

We are going to investigate any attempt to raise the gas tax in New Jersey. Motorists are outraged. Ernie’s phone is ringing off the hook. Gas taxes hurt poor people. An engineer from Jersey City says we can convert the rail tunnels to roads and relieve congestion. Look for that on my Twitter.

ChrisCr

Additional capacity is clearly needed, but it should have been built to GCT, NOT to Penn Station. I understand it is not technically feasible to have tracks go to Penn, and then continue to Grand Central, but couldn’t they have just built a very deep tunnel that went straight to GCT without going to Penn at all?

Then you could run half the trains every morning to Penn, and have to Grand Central. Many commuters are probably going to East Midtown anyways, so it would be more convenient for them.

ChrisCr, why isn’t it technically feasible to have tracks go to Penn and then to GCT?

ChrisCr

Urbanis: from what I’ve read NY subway lines and water tunnels running N-S down the center of Manhattan make it technically unfeasible. Someone can correct me if I’m wrong.

But what’s the point in having trains stop at Penn and then continue to GCT anyways? It would be better if half of them just ran straight to GCT and the other half to Penn. It would be easier, and would provide a faster commute to GCT if the trains that are going there didn’t have to make an additional stop at Penn.

Bolwerk

According to the wikipedos, part of the justification for ESA was that roughly 70% of commuters were going to destinations within walking distance of GCT, and roughly 35% were going to destinations within walking distance of Penn Station (there is some overlap, and some are likely to be going to places nowhere near either). If that’s true for NJT, it would make sense to run the bulk of trains to GCT anyway. There’s probably very limited need to have a train stop at both – and what need there is could probably be met by light rail, subways, or maybe even buses.

Of course, GCT might be less important in and of itself than just making sure trains get to the east side somehow. ARC will get them closer, but not quite there.

B. Samuel Davis

Typical – as if increasing another tax would ever help anything. Rather than looking to INCREASE the gas or any tax tax how about LOWERING taxes, simplifying and decreasing regulations, getting rid of ridiculous environmental regulations, and other anti-business state policies and actions, and letting the overall increase in tax revenue fund transportation. Because, let’s face it, if New Jersey stays on the present course it will not need another railroad tunnel – the level of business will be barely enough to require the two we have.

Larry Littlefield

Hey Mr. Davis, I’m compiled a heck of a lot of data on comparative state and local finance over the years. For decades, New Jersey residents have whined loudly and successfully. The total state and local tax burden as a share of New Jersey residents income was at or below the U.S. average, but spending on those who were not needy was high.

How did they do it? In addition to zoning poor people out of most of the state, they sold the future. And now it is the future.

In FY 2007 the state and local tax burden in New Jersey was 11.8% of the personal income of NJ residents, compared with a national average of 10.8% — and 15.9% in NYC.

Um, yes, increasing taxes have helped things in the past, and may help things in the future. At a very basic level, income, sales and property taxes help to fund all kinds of useful government services. But since your hatred of taxes seems to be based more on faith than on any actual experience, I’m guessing that you would never admit it.

capt subway

Billions could be saved on this project by connecting the tunnels to the existing Penn Sta. Contrary to the BS NJT has put into its press releases regarding this project, there is no reason this cannot be done. The grades are doable and there is no problem as regards the #7 line extension. In fact this was the original plan, endorsed by NJT about 10 years ago. In addition it would give the who NE Corridor the redundancy it is so desperately lacking through its most heavily traversed segment between NY & NJ, where an essentially four track mainline is squeezed to two. The deep level dead end station under 34th St is a total waste of a huge sack of money. Christie is right…but for the wrong reason.

@ChrisCr: the water tunnel is an impediment to running through to Grand Central if and only if the Penn Station stop is deep underground. The north-south subway lines are never an impediment, as it’s straightforward to tunnel underneath them while still maintaining adequate separation from the water tunnel.

As for your statement that “But what’s the point in having trains stop at Penn and then continue to GCT anyways?” you should go to Human Transit and read about the importance of frequency. The travel time benefit of skipping Penn is negligible; the cost of splitting frequencies is very high.

Larry Littlefield

“Billions could be saved on this project by connecting the tunnels to the existing Penn Sta. Contrary to the BS NJT has put into its press releases regarding this project, there is no reason this cannot be done.”

The MTA made the same choice for East Side Access. I think that planners believed that the reason major transit investments had not been made was NIMBY, and they sought to avoid surface disruptions during construction at all cost by going deep. I did not agree, but you certainly hear one hell of a lot of whining as it is.

Despite the attempt to avoid NIMBYism, ESA encountered opposition from the local Cardinal, whose cathedral is going to face new ventilation structures.

Bob P

We have the inept government of NY working with the corrupt government of NJ. The cost overruns are horrendous. I support Christie’s desire to understand where the money is going, and determine where the money is best spent. This is no different than any of us do with our personal finances (or should). When we face hard times, we look at all expenses, and allocate our money to the necessities first.

ChrisC

I’m well aware of the importance of service frequency. But if they had the option, the majority of commuters would go straight to GCT, and NOT Penn. They wouldn’t care about service frequency to Penn, only service frequency (and travel time) to GCT. Having trains stop at Penn before continuing to GCT would only add travel time.

East Midtown is where the bulk of the office space is, not the Penn Station area.

Larry Littlefield

“East Midtown is where the bulk of the office space is, not the Penn Station area.”

I wouldn’t bet on that being true 50 years from now. Lots of buildings around GCT are old compared with modern offices. Residential conversions are possible. Extensive new office space is planned for the area from Penn Station west.

If it were up to me, I would have put the new terminal under the Port Authority Bus Terminal and renamed it “New Jersey Station,” a joint bus/rail station with a branch off to Penn Station via the west side line. NJ riders would have had a longish walk or a short subway or bike ride to the GCT area, like bus riders do today.

It remains to be seen, however, whether NJ is willing to pay anything for improved access to Manhattan, even with NYers kicking in via the Port Authority and funds from the federal government.

Chris, a small majority would want service to GCT. While GCT is closer to more office space than Penn, it’s not 90-10; it’s closer to 60-40. You can’t run transit by majoritarianism.

And Larry, going to Port Authority would require a new train cavern, on top of splitting frequencies. What’s so wrong with using the existing 21-track station, anyway?

Mike

This is a response to “Fake Marcia Kramer”.

What are you talking about? It has been proven over and over again that you cannot build enough roads to accommodate capacity. The roads get bigger, the commute time goes down initially, the incentive is to drive, more cars go on the road and then you’re right back where you started.

Do gas taxes hurt the poor more? They can but there are many ways to address that- including building and adequately funding public transit and stop building sprawl.

Larry Littlefield

“And Larry, going to Port Authority would require a new train cavern, on top of splitting frequencies. What’s so wrong with using the existing 21-track station, anyway?”

My understanding is there are capacity issues, with Amtrak, NJT and the LIRR fighting over slots. The 21 tracks are not a lot for a terminal, vs. a through station. And while NJT trains can and do run out to the Sunnyside Yards, the preference is three tracks in the rush our direction and one track the other way.

One could make the case that not using the track capacity at GCT was the greater crime. Since borrowed money is “free,” the tendency has been to resolve disputes by adding money. So instead of taking tracks away from MetroNorth and routing some MetroNorth trains to Penn, they created a whole new station for the LIRR.

Mike, don’t worry. People use the prefix “Fake” to denote that they are attempting a parody of the person whose name follows.

david vartanoff

Christie is wrong, BUT the current plan is even dumber. The new tunnels should connect to NYP both for redundancy and flexibility. As to capacity, the bite the bullet reality is extending compatible catenary so that NJT EMUs can through route to LIRR and NH points. Having four RR operators w/an incompatible mix of 2 third rail standards and three catenary voltages just has to go.

My understanding is there are capacity issues, with Amtrak, NJT and the LIRR fighting over slots. The 21 tracks are not a lot for a terminal, vs. a through station.

The capacity issues are fabricated by people who either have no idea how modern railroads work, or are trying to justify grandiose projects to line their own pockets.

While there are termini with more than 21 tracks, for Penn’s traffic 21 is more than enough. It’s no longer the steam era, when trains parked at terminals for hours. Think how quickly the 42nd Street Shuttle trains turn at the terminals at rush hour. This is also doable on commuter rail: multiple JR East lines turn 12 tph on 2 tracks (the Chuo Line turns nearly 30); with that efficiency, Penn’s 62 peak tph could be restricted to 11 tracks. With through-running, going down to 6-8 tracks would be easy, and in a crunch 4 could suffice.

karen Wright

as we move toward a society less dependant on individual cars, our need for additional public transportation is crucial. This new tunnel, followed by a subway system will not only allow those residing in Jersey to have public transportation into Manhatten, but it will be a positive step toward not relying on mideast fossil fuel, thereby reducing emmisions one of the most populated area of our country. This is a positive investment for future generations that must not be ignored. As we struggle to meet the needs facing us today in this economy, let us not forget our dreams for a better life in future generations.

ZJ

I have a much better idea. Since it’s very difficult to move people through tunnels to an over-crowded island, why not move some of those manhattan jobs to new jersey. new jersey would be even better off.

It’s not sensible for the government to subsidize trips to manahattan at great expense. i would bet if half of that $2.7B was used to entice employers to new jersey from mid-town manhattan, NJ would be much better off.

And the other 50% of NJ would not have to pay a higher gas tax to benefit wealthy northern new jersey residents

RIP ARC

Its even sadder to read all the comments now. Yes, Chris Christie killed the tunnel, but he was aided by all of the people, like the commenters below, who support mass transit but dithered about the routing, connections to GST, etc. Many people who should of been out supporting this project were instead arguing for the perfect at the expense of the good (and totally needed). They now have nothing, and will have nothing for decades to come (aside from crowded trains and more frequent delays).